30.09.2019, 15:28
Fitch Downgrades Saudi Arabia to “A” from “A+” with Stable Outlook
Source: OREANDA-NEWS
OREANDA-NEWS. The international rating agency Fitch downgraded Saudi Arabia's long-term issuer default rating (IDR) to "A" from "A +", the agency said.Forecast set to stable. "The downgrade reflects the growth of geopolitical and military tensions in the Persian Gulf, the revision of the assessment of the vulnerability of the economic infrastructure of Saudi Arabia, as well as the deterioration of the country's balance of payments", the Fitch said.
Fitch analysts emphasized that, despite the restoration of previous oil production after attacks on oil infrastructure, there is a risk of a new attack. This will result in new economic damage. In addition, the ongoing Saudi budget deficit is a contributing factor to the downgrade. Fitch analysts forecast a country's budget deficit of 6.7% of GDP in 2019, versus 5.9% of GDP a year earlier. In their opinion, this is due to a decrease in average oil prices and production volumes. "We assume that the price of Brent crude oil will average $ 65 per barrel in 2019 ($ 71.6 per barrel in 2018) and that oil production in Saudi Arabia will average 9.7 million barrels per day (from 10, 3 million barrels per day in the previous year)", Fitch said.
On the night of September 14, two enterprises of the Saudi Arabian national oil company - Saudi Aramco - were attacked by drones. Hussite rebels from the Ansar Allah movement claimed responsibility for the attack.
As a result of the attack, production of Saudi Arabia, the largest oil exporter in the world, collapsed by more than half - by 5.7 million barrels per day out of 10 million barrels. This led to a sharp jump in oil prices.So, on Monday, September 16, Brent rose in price by 17%, but by the middle of the day the growth was corrected to 8%, and quotes reached almost $ 66 per barrel.
Fitch analysts emphasized that, despite the restoration of previous oil production after attacks on oil infrastructure, there is a risk of a new attack. This will result in new economic damage. In addition, the ongoing Saudi budget deficit is a contributing factor to the downgrade. Fitch analysts forecast a country's budget deficit of 6.7% of GDP in 2019, versus 5.9% of GDP a year earlier. In their opinion, this is due to a decrease in average oil prices and production volumes. "We assume that the price of Brent crude oil will average $ 65 per barrel in 2019 ($ 71.6 per barrel in 2018) and that oil production in Saudi Arabia will average 9.7 million barrels per day (from 10, 3 million barrels per day in the previous year)", Fitch said.
On the night of September 14, two enterprises of the Saudi Arabian national oil company - Saudi Aramco - were attacked by drones. Hussite rebels from the Ansar Allah movement claimed responsibility for the attack.
As a result of the attack, production of Saudi Arabia, the largest oil exporter in the world, collapsed by more than half - by 5.7 million barrels per day out of 10 million barrels. This led to a sharp jump in oil prices.So, on Monday, September 16, Brent rose in price by 17%, but by the middle of the day the growth was corrected to 8%, and quotes reached almost $ 66 per barrel.
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